Recently, 11 class actions were filed against 42 crypto companies in 16 countries for the sale of unregistered cryptocurrencies.
The news was made public by OffshoreAlert, which revealed that these complaints were filed with the federal court in Manhattan on April 3rd, against the likes of Binance, BitMEX, TRON, Block.One, Civic, KuCoin, Kyber Network, Status, Bibox, Quantstamp and others.
These lawsuits are being filed by “boutique litigation” Roche Cyrulnik Freedman, the same law firm that is also representing Dave Kleiman’s heirs in the case against Craig Wright, on behalf of people like Chase Williams, Alexander Clifford, Eric Lee, and William Zhang, but as a class action they also apply “on behalf of all others similarly situated”.
The allegation is that they sold US investors crypto tokens that were actually unregistered securities.
In particular, for example, the complaint against Binance reads:
“Binance and the Issuers wrongfully engaged in millions of transactions—including the solicitation, offer, and sale of securities—without registering the Tokens as securities, and without Binance registering with the SEC as an exchange or broker-dealer. As a result, investors were not informed of the significant risks inherent in these investments, as federal and state securities laws require”.
It is not known specifically which tokens have been involved, but one of them is definitely the one issued during Block.One’s colossal ICO, which raised over $4 billion in 2018. Already in September 2019, the company was forced to pay a penalty of 24 million dollars for having conducted the sale of these tokens, which turned out to be unregistered securities.
Given the precedent, it looks like the plaintiffs may have something to look forward to.
In that regard, the complaint states:
“The creation of EOS tokens thus occurred through a centralized process, in contrast to Bitcoin and Ethereum. This would not have been apparent at issuance, however, to a reasonable investor. Rather, it was only after the passage of time and disclosure of additional information about the issuer’s intent, process of management, and success in allowing decentralization to arise that a reasonable purchaser could know that he or she had acquired a security”.
There is a real possibility that the court may accept these complaints and open a case, but the matter is expected to be long and cumbersome.